London, 30 July 2005: futuretext Ltd today announced that leading advanced telecoms services guru Tomi T Ahonen, an author of four best sellers, has joined the futuretext board. Ahonen will advise the company on opportunities in publishing titles on near future industry trends, in particular on high technology in IT, telecoms and digital communities. He will also seek to discover new writing talent for futuretext, as well as supporting futuretext authors in gaining market visibility.

Tomi Ahonen has authored three global, best selling books on the business application of 3G telecoms with John Wiley & Sons. His fourth book, Communities Dominate Brands, co-authored with Alan Moore, was published by futuretext Ltd in March 2005. Ahonen is developing further titles for release by futuretext. A regular speaker at technology conferences on six continents, he has been quoted in over 120 press articles. Formerly head of 3G consulting at Nokia, Ahonen regularly lectures at Oxford University’s 3G Telecoms courses.

“Tomi is a visionary with remarkably accurate views of the future,” said Ajit Jaokar, founder and CEO at futuretext. “With his deep connection to strategic thinking at global leading companies, Tomi is ideally placed to provide guidance to us in isolating promising book project opportunities and discovering new authors. We are proud to be associated with Tomi, of the early strong sales of his first title with us, and are looking forward to working more closely with him for the benefit of high quality non-fiction literature on near future topics. We are especially looking forward to publishing a series based on Tomi’s mobile pearls”

Tomi Ahonen said: “futuretext has been unbelievably strong in their personal support of my latest book and have impressed me as being a truly modern book publishing company. I am eager to help them grow and use the futuretext opportunity to provide young aspiring thought-leaders the platform to become published. The near future for technology and digital communities is an immense opportunity for innovation, and books to support that intellectual growth will be in strong demand. futuretext is excellently poised to deliver extraordinary titles with true impacts to our industry.”

About Tomi Ahonen:

Tomi T Ahonen, MBA, is the world’s leading expert on business and services for next generation telecoms and digital communities. Speaking at over 100 conferences on six continents, he regularly lectures at Oxford University. Tomi’s reference customer list is the who’s who of leading mobile telecoms: Ericsson, Orange, Nokia, NTT DoCoMo, Siemens, Teliasonera and Vodafone. His books are Communities Dominate Brands (with Alan Moore), 2005; 3G Marketing (with T Kasper and S Melkko) 2004; m-Profits 2002; and Services for UMTS (with J Barrett) 2002.

About futuretext Ltd:

Founded in 1999, futuretext is a publishing company whose focus is on wireless, mobility and digital convergence. We publish books (as opposed to management reports) and we work with some of the best authors in this sector. We commit to a space and then to the authors within that space. As a publisher of wireless/mobile books – we want to make a difference. We often take up a ‘cause’ – providing a platform for issues that we believe should be heard. Our authors are experts in their chosen sector. They are passionate about sharing their knowledge and making a tangible difference to the direction of the industry.

In the mobile data industry, is the network effect being hampered by broadcast content?

A synopsis –

We first discuss the meaning of the two terms ‘network effect’ and ‘broadcast content’ and question if the requirements of these two are mutually contradictory. Finally, we outline the proposition that more openness will foster the network effect in the industry leading to viral applications.

a) what is Metcalfe’s law or network effect?

The network effect, also known as Metcalfe’s law(for the purposes of this discussion, we can use these two terms interchangeably) was the main driver behind the dot-com model. While Metcalfe’s law has inevitably been tarred by the failure of the dot-com boom, the benefit of hindsight shows us that the network effect is indeed a valid phenomenon(albeit misapplied in the dot-com context)

The network effect causes a good or service to have a value to a potential customer dependent on the number of customers already owning that good or using that service. Metcalfe’s law states that the total value of a good or service that possesses a network effect is roughly proportional to the square of the number of customers already owning that good or using that service.

S. J. Liebowitz and Stephen E. Margolis elaborate more in their paper Network Externalities (Effects) by giving an example of a fax machine. In effect, the value availed from a fax machine has two components – firstly the ‘intrinsic value component’ of a single fax machine but also ‘the network effect component’ i.e. value gained by other users using fax machines(i.e. the ability to communicate/network effect)

The concept of network effect is thus tied to the concept of ‘critical mass’ i.e. at a certain point called as the critical mass, the benefits gained from the ‘network effect component’ kick in and lead to huge competitive advantage and increased revenue. In short, a successful application. Until that happens, the full potential of the technology/service cannot be availed and the user base is confined only to early adopters. The dot com boom(and bust) adopted the above principle(which is valid) and added to it the concept of ‘unprofitable enterprises’ (which is invalid).

However, the benefits of network effect are not in doubt. In fact, with hindsight, we can see that network effect works(think success of ebay).

b) How does this phenomenon play out in the mobile data industry?

Clearly, if we find a set of applications/technologies that have a tendency to benefit from the network effect, we could all benefit. But sadly, at the moment – we see a number of ‘failures’ rather than successes. The key ‘success’ in terms of the benefits of network effect is the humble old SMS. In fact, the success of SMS(and also more broadly the success of GSM – which is a collaborative venture) shows that the industry indeed can ‘get it right’.

c) How do we then explain the many failures(i.e. why do we see so few network effect applications?

Taking a step back, lets see what factors contribute to the proliferation of the ‘network effect component’? The usual factors prevail – the service must be cheap, easy to use, the customers must want it .. and so on. But over and above all this .. the service must be ‘interoperable’ or ‘capable of being viral’. In other words, it must be capable of spreading. If we introduce barriers to the spread of content – we kill it even before we even start. Forget about network effects!.

Take MMS – clearly this technology/service could benefit from the ‘network effect’ component. In simplest terms, it should be easy to ‘share’ content with other users. This means more people will take up MMS if they can firstly create their own content and secondly share that content(cheaply and easily). Creation of own content is possible via camera phones – sharing it cheaply and easily is far from possible!. So, who uses it(if at all)? Inevitably,it’s early adopters who have found a better way(sharing images by bluetooth or email) but it’s not the mainstream user.

If the benefits of the network effect are apparent from the Internet, why does the mobile data industry create so many barriers? Could it be because they are driven by the media/content industry with it’s protectionist/broadcast/DRM mindset? Indeed, I believe that the requirements of the media/content industry are in contradiction to the ‘network effect’ application. In the former, you must restrict the free flow of content. In the latter, you must actively encourage the free flow of ‘user created content’. Note this is not an argument for the ‘napster mindset’. We are not advocating swapping of ‘Hollywood’s created content but rather seek to encourage the free flow of ‘user created content’. At the moment, the restrictions put in place serve the media industry at the expense of the ‘real customers’ i.e. those who want to communicate. And this cripples the mobile data industry.

The mobile data industry must realise that it’s far bigger than the ‘song and dance’ crew. We are a major communications platform and we must not let outdated business practises hamper the true potential of our industry.

At the moment, the industry is facing the media barons with it’s back to the customer! It is driven by the ‘broadcast content’ model. The ‘Lord of the rings’ ringtone, ‘Harry Potter’ images and so on. All driven by the music industry/Hollywood. The chase for media dollars serves a short term goal. Operators must realise that they are the masters and not the slaves to the media industry.

When we speak to operators, they often naively talk of ‘on portal/off portal’ and insist that there are no walled gardens in the industry today. But that’s very limited thinking. OpenGardens is in effect, a mindset which makes the rise of an application with a high ‘network component’ possible.

d) Extending this thinking further, my advice at the moment is to ‘seek the network effect application’ but focus on the ‘multiple channels to market’ to help build up sales for your new service.

Ultimately, when the mobile data industry will move beyond serving the media industry to serving their real customers, the industry will lend itself to applications that thrive on the network effect – and that will create an ecosystem to the next ‘killer app’.

This section reflects our thinking for the next version of OpenGardens. It is an excerpt from the first chapter

Introduction

A few months ago, we were approached by a company that had created ‘an interesting mobile application’. They were eager to demonstrate it to us.

They hoped that we would be able to advise them on the best way to deploy the application to mobile operator portals. It was pitched as ‘unique’ and ‘viral’. We were intrigued enough to meet them.

Functionally and technically, the application worked perfectly. However, it was based on sending MMS (Multimedia messaging service) messages to any other phone in the country. They believed that since MMS had been around for some time now, it was a mature technology. In addition, a majority of new phones today are camera enabled. So, they believed that the future of MMS was secure. They even had a report from a top tier consulting company indicating that by year 20??, 90% of phones would have the required MMS capability. All this made them believe that they had a ‘mass market’ application.

They had ‘tested’ it on a set of phones. We noticed that the same phone model was used to test the application in sending and receiving the message. We also noticed that all the phones being tested were on connections from the same mobile operator(carrier).

A lot of money had been spent already in development, testing and a set of ‘advisors’.

Much to their dismay, we felt that this application could not be deployed in the near future. Sadly, this scenario is common with so many applications that we see today. So much so – that helping new companies to avoid similar errors is one of the chief motivations behind OpenGardens.

OpenGardens

Leaving aside technical issues(sending MMS messages to any phone) there are two fundamental problems

a) For a ‘viral’ application (think ‘hotmail’) you need favourable conditions for the network effect/metcalfe’s law to thrive and

b) The Mobile operator portal is often not the best channel to market. It would potentially be a lot more profitable to explore other channels to market.

These two problems crystallise the rationale behind OpenGardens.

Written for the applications developer, OpenGardens draws on our extensive experience of working with emerging mobile data applications(our online/offline communities span more than 3500 developers from more than 26 countries at last count).

We are believers in it’s true potential. And it does have tremendous potential – as yet untapped. But, there are many pitfalls. It’s easy to get seduced by the mobile data industry. After all, the Internet was a goldmine – so why not the Mobile Internet? – goes the train of thought. This superficial comparison ignores many things – the first being that the Internet has been around for more than twenty-five years and it’s really only in the last ten years that we have seen the entire ‘Internet economy’. Secondly – the success of many applications on the Internet(hotmail, paypal, ebay etc) have been powered by the ‘network effect’.

Sadly, at the moment, the mobile data industry is not conducive to the emergence of the network effect(in a majority of cases).

Take the case of MMS – it’s not very easy to send an MMS message across operators. The costs of doing so are unclear. The minimum data sizes supported are not very well publicised. In addition, it’s physically not easy to send the MMS message. So, whatever the pundits say .. it’s far from viral.

In light of the above(no network effect), there are two things you could do.

Either – you give up on the industry for now (in which case you are reading the wrong book ) or you reconsider that the industry has potential to be a trillion-dollar industry.

This brings us to the second facet of OpenGardens – It’s important to understand ‘channels to market’ to complement the current industry fragmentation.

In other words, our goals should be to firstly understand the various channels to market which could be used to deploy our application(so that some revenue starts to come in) and at the same time keep a lookout for sectors of the industry displaying the network effect.

In effect, the philosophy of OpenGardens encourages the emergence of the network effect in the mobile data industry. The word ‘OpenGardens’ is the philosophical opposite of the often prevalent ‘walled gardens’ mentality in the industry.

So, we have to understand two things – firstly the ‘network effect’ and secondly ‘channels to market’.

Let’s start with understanding the network effect.

Metcalfe’s law and the network effect

According to www.wikipedia.com

The network effect causes a good or service to have a value to a potential customer dependent on the number of customers already owning that good or using that service. Metcalfe’s law states that the total value of a good or service that possesses a network effect is roughly proportional to the square of the number of customers already owning that good or using that service. One consequence of a network effect is that the purchase of a good by one individual indirectly benefits others who own the good – for example by purchasing a telephone a person makes other telephones more useful. This type of side-effect in a transaction is known as an externality in economics, and externalities arising from network effects are known as network externalities. This is also an example of a positive feedback loop.

What does Metcalfe’s law mean for us in the mobile data industry?

While we talk of ‘customer created content being king’ – we make sharing of that content very difficult on the mobile device. Yes, you may be using a camera phone – but it’s increasingly difficult to share your pictures via MMS for the reasons outlined before. Let’s go one step further, you are in a ‘walled garden’. Thus you can create your own content but you can’t share it with anyone outside that wall. Ho – hum!

The one instance where the network effect works in the mobile data industry is – SMS(Short messaging service). It’s cheap, it’s simple, ALL content is user created, it’s price is known in advance, almost all phones support it and in most cases(at least in Europe) – you can send and receive an SMS message from anyone on any network.

There are very few ‘barriers’ to SMS. SMS is an example of creation of a successful ecosystem using the OpenGardens mindset. The OpenGardens mindset calls for a breakdown of barriers to foster uptake i.e. creation of an ecosystem where it’s possible to deploy an application that has the potential to benefit from the network effects. This means removal of physical barriers(inability to send MMS messages to subscribers of other operators) and psychological barriers(not knowing the cost of a service in advance).

New mobile applications based on Metcalfe’s law

Ahh .. But isn’t the network effect/metcalfe’s law tarred with the dotcom fiasco?

While it’s true that the network effect was presumably behind many a ‘dot com’ business model – we now have the benefit of hindsight with the passage of a few years.

Network effects were often misunderstood with economies of scale(or worse still brand protection). Economies of scale arise from lowering costs of production as volumes increase. Brands, on the other hand, rely on trust. Network effects are neither of these. Network effects rely on interoperability and increasing usage base with each new user benefiting from the collective heritage of the older users who used the service.

How can this thinking be applied to the mobile ecosystem? Consider an application like a ‘mobile recommendation search engine’. A mobile recommendation search engine’ is a community based system that rates products and services which you could access from any mobile device.

This application could benefit from network effects i.e. as more people use the system, the more frequent and better the recommendations.

It would still be necessary for other factors to be favourable(for example costs being pre determined) but if conditions are favourable, such an application could gain a significant competitive advantage.

The impact of ignoring OpenGardens/network effects ..

Sadly, the industry is yet to appretiate the full potential of the OpenGardens / network effect. The old ‘walled gardens’ mentality proliferates. Content – is viewed as ‘broadcast content’ not ‘user created content’. This brings DRM and other restrictions to the user experience. The fundamental assumptions in this case are often wrong. As richer content types emerge – there is an attempt to ‘bolt on’ the old to the new. We see that with ‘mobile TV’. It’s debatable if customers want to see TV and movies on small handheld screens. Yet, the movie industry is already worried about the emergence of a new napster in this space!

This is old thinking – with very little added value. However, as the industry matures, we are optimistic that more OpenGardens thinking will become mainstream.

Written from first principles, the article explores the potential impact of mobile video technology. I propose that mobile video podcasting(for the lack of a better word) will emerge as the killer app for mobile video.

Background

In the financial times in Tuesday June 21 (London), there was a statement from McKinsey (Global management consultancy) :

“The basis for content on the Internet is shifting from text to video”.

I believe that the mobile Internet is also mirroring this seminal shift. As with many significant developments, this one has been creeping quietly upon us and suddenly it’s a bandwagon! However, unlike traditional hype(vapourware), for once, there is a definite date to watch – June 9, 2006, – the soccer world cup in Germany. This event is billed as the grand showcase for mobile video. For the first time, it will be possible to view video clips of the world cup on your advanced mobile phones.

Video content(movies, TV programs etc) is fast becoming digitised and thus deployable over different technologies. There is a lot of buzz(and some might say hype) around mobile video/TV. According to consultancy Strategy Analytics , mobile broadcast networks will have acquired around 51 million users worldwide by 2009, producing around $6.6bn (£3.5bn) in revenue.

As the above statistic shows, many in the industry discuss ‘Mobile TV’ and ‘Mobile Video’ in conjunction with each other focussing perhaps on mobile TV – more than mobile video. However, ‘mobile video’, is the technology and ‘Mobile TV’ is just one application of this technology. In fact, discussing Mobile TV and Video together trivialises the potential of Mobile Video. It gives the impression that the two are synonymous. In other words, it gives the impression that the only application of mobile video is mobile TV. As we discuss below, that’s not quite true and I believe that the biggest application of Mobile video will be ‘mobile video podcasting’ (for the lack of a better word).

Significantly, the entire value chain is being affected ranging from mobile operators, handset manufacturers, broadcasters to content creators. Also, new value chains are being created in the industry. Consider these examples of recent industry activity

· Fixed line operators like BT are launching trials of IPTV.

· Search engines like google and yahoo are extending search to video.

· Mobile networks are working with streaming video.

· VCs are funding start-ups like blinkx to enable audio and video search

· Triple play is the new buzz word which providers aspire to(i.e. providing online access, telephony and television)

Amongst all this, it’s debatable if customers are actually willing to pay for mobile TV. Naïve commentators have already written it off on the grounds that ‘we don’t know if customers will pay for it. Hence it may end up like MMS etc etc’

Once again, they are confusing technology with application.

Mobile TV is getting some media interest because it is getting interest from content owners like the movie and television companies. Customers may or may not be interested in watching TV/movie clips on mobile phones. Mobile TV follows the traditional broadcast model – which means transmitting information to consumers who are passively expected to consume whatever they are being fed. Some providers are trying to make it ‘free’ by ad sponsorship. It’s debatable if people will want to watch ads in a small video clip. It’s further debatable as to what is ‘free’ – in the sense that the customer still pays for data charges which could be significant(we will come back to this later).

Understanding Mobile video technology

To understand the true potential of mobile video – we have to separate it from mobile TV and look at the underlying technology. There are two main competing technologies in this space - Digital Multimedia Broadcasting ( DMB) ) and Digital Video Broadcasting – Handheld ( DVB-H ).

It’s no coincidence that they both have the word ‘broadcasting’ in their acronym. The first thing to understand about mobile video is – it is indeed broadcasting.Mobile video can be viewed similar to an FM radio receiver on the mobile device. It can receive any compatible transmission.

The receiver can ‘pick up’ any transmission – i.e. it does not have to come through the mobile operator. This feature makes mobile video a disruptive technology. Similar to technologies like Bluetooth and WIFI – mobile video may not necessarily generate revenue for the mobile operator. Thus, it has found more enthusiastic initial support amongst the handset manufacturer community than the mobile operator community.

However, the broadcast(one to many) model could be complemented by the personalization (one to one) model made possible by 3G. For example – a video of a race could be seen via broadcast but interactive betting would be possible via 3G.

As we mentioned above, the main two technologies being developed in this space are DMB and DVB-H. DMB (digital media broadcast) is deployed in Korea with some support outside of Korea. DVB-H (digital video broadcast – handheld) is popular in Europe. Besides these, there are others such as ISDB-T (integrated services digital broadcast – terrestrial) in Japan and standards being developed in China.

DMB and DVB-H come from different backgrounds – each having advantages and disadvantages. DMB is based on the DAB(Digital audio broadcast) standard which itself is already deployed in many countries. DVB-H, on the other hand is based on DVB-T (Digital Video Broadcasting – Terrestrial) standard that is used for digital television. Each technology has it’s supporters and detractors. Whichever technology proliferates in a particular geography, mobile video itself seems to be a promising application(to re-emphasise once again – mobile video is not the same as mobile TV).

Ofcourse, video could reach handsets over other technologies – 3G, WIFI and so on. However, the industry seems to be favouring a broadcast solution. Besides the choice of technology itself, there are other issues such as DRM and copy protection. The actual experience(and cost) of downloaded video clips is yet to be determined. Thus, the technology exists. But content, pricing, DRM issues remain.

So, what could mobile video technology be used for? Consider that it has a viral element to it(since content does not necessarily need to go through an Operator). Hence, my bet is – Mobile video podcasting.

What is podcasting?

According to Wikipedia(www. Wikipedia.com), ‘Podcasting is a method of publishing files via the Internet, allowing users to subscribe to a feed and receive new files automatically. It became popular in late 2004, intended largely for downloading audio files onto a portable MP3 player. However, listening to podcasts does not require a portable player and it is not traditional “broadcasting” to a mass audience at a fixed time.’

Podcasting is a portmanteau word, combing “broadcasting” with the name of Apple Computer’s iPod audio player (although podcasting was not invented by Apple, nor do podcasts require a portable player or Apple software).

It is distinct from other types of online audio delivery because of its subscription model, which uses the RSS 2.0 file format. Podcasting enables independent producers to create self-published, syndicated “radio shows,” and gives broadcast radio programs a new distribution channel. Listeners may subscribe to feeds using “podcatching” software (a type of “aggregator”), which periodically checks for and downloads new content. Some podcatching software is also able to synchronise (copy) podcasts to portable music players. Any digital audio player or computer with audio-playing software can play podcasts. The same technique can deliver video files, and by 2005 some aggregators could play video as well as audio.’

The very last sentence alludes to the concept we are discussing – i.e. the ability to manage video content.

It is an intuitive step to consider a personalised ‘video channel’ – broadcast(podcast) by an individual and downloaded by interested subscribers.

Creation and publication of content have become easier. Hence, more people are creating and distributing their own content. If mobile video can be positioned as the optimal(cheapest, easiest) method to acquire video content – then many more providers may adopt the medium.

While RSS has potential to deploy content(an RSS feed could be automatically updated – keeping the content fresh) – the biggest problem with RSS at the moment is – it will use the 3G radio network. This means, IP charges will have to be paid. That’s not the case for mobile video(which is not transmitted over the 3G network).

In the last OpenGardens event , I naively asked Mike Selby(Nokia Global VP) – ‘Can anyone set up a TV broadcasting station?’ Obviously not! There are a ton of regulations to stop you. But … Here is my train of thought ..

a) Can anyone set up a ‘podcasting’ station? – Yes – already being done

b) Can video be a part of podcasting? Yes – most definitely

c) Can RSS be the conventional method of broadcasting video on mobile devices? – probably not because of IP charges

So, I leave you with the question – can mobile video be used to achieve ‘mobile video podcasting’? My view is YES – because – conceptually, it’s not a big leap from podcasting and further, it does not involve IP charges over the telecoms netwok. I seek your views.

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Mobile video podcasting: The killer app for mobile video?

You may reprint or link to this article as long as you acknowledge the source and provide a link back to www.opengardensblog.futuretext.com . If you would like to add any insights, please email me and I am happy to include relevant feedback alongwith a link back to your site on my blog.

I am at the launch party of the new book distraction (published by my company – futuretext ) this thursday. If you can make it, please let me know. It should have some well known industry players – especially in media and telecoms.

The party is in Vinyl Factory, opposite Fjord – see the map attached – on Thursday July 14th at 6.30 pm. Drinks, other fascinating people –the usual stuff.

Distraction – being human in the digital age

The explosion of new communications technology – the internet and mobile phones – means we’ve reached a social tipping point of no return: for we are becoming ‘always on’. Not only connected all the time to “the network”, but distributing ourselves to others through it.

Is it possible for individual humans to deal elegantly with the abundant communication possibilities of the modern world? Are we in danger of paying more attention to the potential of a text message than the here and now around us? As we seek to find ways to incorporate the web, e-mail and mobile phones into our lives, it is clear that the boundaries between private and public space are breaking down.

In the age of 10,000 songs in your pocket, why are sales of old fashioned records booming?

Do we run the risk of believing that data is everything, and confusing information with knowledge?

Why is our sense of time and space changing radically? Digital space is upon us but what will it look like?

Lack of time is the most frequent complaint of harassed adults in the early 21st century – where has it all gone?

What can we do to make the best of new technology?

What can we learn from a virtual hotel run by teenagers?

How can we use digital to map out and fashion new expressions of identity?

Will we trade privacy willingly for security?

And above all, how can we use new technology to be creative and celebrate us, to leave a vibrant legacy for the future?

Thank you to all who contacted me by email, phone and text message about the events in London. I was in central London and thanks to a delayed taxi missed being at Kings Cross this morning. So, I was luckier than many others.

I was in central London today – and the biggest impression I have of today is the calm, resilience , determination and cooperation of Londoners. All kudos to the emergency services for handling the situation exceptionally.

I’m writing a piece looking at mobile commerce in the UK. With the EC having finally overturned their e-money ruling (that banned pre-pay users from using premium SMS to purchase anything that wasn’t consumed on the phone) premium SMS could be a perfect payment method from everything for online content to goods like CDs.

For instance, why couldn’t a newspaper, with every album review, add “text ‘U2′ and your address to have the album delivered, billed to your phone.”

Is mobile commerce like this going to take off?

I’d be very interested in hearing from anyone doing interesting work in this area.

Cheers,

Justin

–

very interesting .. [ Ajit Jaokar ] [ 15-Mar-05 9:29pm ] [ edit ]I hope to spark a debate on this topic. I think the industry would truly open up with we got the mcommerce right. Like Jerry Mc Guire says ..’Show me the money’!

Its sad that legialation is holding back what is otherwise a perfect cross industry mechanism.

Challenge [ Ewan J. MacLeod ] [ 15-Mar-05 10:24pm ] [ edit ]

The operators will need to reduce their cut first Justin.

More trust needed [ Paul Buckley ] [ 15-Mar-05 11:07pm ] [ edit ]there is an additional level of trust that needs to be earnt by the mobile operators before we will all switch to using our phones as a frequent payment vehicle for larger (£s vs p) transactions…if I bought that U2 album on my credit card, I trust that the correct amount will be billed to my account…I might try that on my phone today but I would check it each and every time right now.

Reminds me of the telcos becoming banks debate that raged a few years back…I trust my bank, they have never got a transaction wrong…telco billing errors are significantly more common (unfortunately).

I want to be able to trust my phone provider to the same extent I do my bank/credit card provider as a needed step before mass take-up of mobile payment solutions like this.

At long last the EC have seen the light instead of acting like a bunch of bureaucratic idiots – of course it will take the FSA 23 years to ratify it, but we are close. However, the networks are still extremely greedy and as Ewan says, nowt will change until they re-work their greedy model.

Pay for newspapers!? – get real!!! Imagine if every time you went into the newsagent and handed over your 50p for a newspaper, a little oik from a bank jumped in between you and the shopkeeper, took your 50p, pocketed 30p and handed over the remaining 20p to the shopkeeper. Yeah that sounds like a great concept…not…

why is it that loan sharks are frowned upon for taking unreasonable percentages yet 6 of the biggest companies in this country get away with such out and out greed.

Why on earth do the networks think they can get away with this nonsense!? We are very very close now to having secure credit card payments on mobiles and the banks will dive in head first to support this. The mobile networks as payment takers will be crushed at that point and their premium sms will be something we all laugh about at parties in a few years time.

BTW, I find Virgin and 3, followed by Orange payout the lowest, what do other aggregators think? Lets compile a chart…

cheers

Steve

2-way sms for £99 per year

Steve Procter. Chief Executive. +44 (0)8712 777 111.

Greed II [ Steve Procter ] [ 15-Mar-05 11:22pm ] [ edit ]

Justin

Sorry, to answer your specific question, if the networks sort out their cut and get down to a few percent like the banks then yes, premium sms will become the killer app to kill all other apps dead…it will be majorly massive…in a very big way…..big…

My view is certainly that there is a huge opportunity for the mobile operators if they can get this right.If I could pay for goods, easily, securely, cheaply from my mobile why would I continue to carry around a wallet as well.

However … it does seem unlikely at the moment that the mobile operators are capable of achieving this because of the reasons Paul and Ewan have pointed out. My advice to the Operators would be

1) Sort out your billing systems or better, do a deal with a Bank to do it for you and

2) have the belief that a small percentage of a huge volume of transactions will be worth more than a huge percentage of a small number of transactions.

Nick

Check out the BT Callwise trial at www.bt.com/callwise for cheap international calls from your mobile

There’ll be opportunities for premium SMS of course and it will fill a niche but for items where you are physically present (e.g. buying a newspaper or at the convenience store) it will be far easier to just swipe the handset such as in Felica in Japan.

- gain trust that they can look after every single penny of your money. Many would argue that the networks’ billing systems will not stand up to the sorts of transaction volume increases that would be seen if mcommerce really took off.

- offer payouts of up to 99% of the revenue. As everyone on here knows, that’s what you can get from accepting credit cards in ecommerce.

- improve the delivery reliability. Until last year delivery receipts on premium sms where not even widely available. Even now, not a high enough percentage of premium sms is delivered and charged sucessfully to the phone. This makes the model very difficult for some content providers as they might have already delivered the content. Delivery receipts need to become realtime (just like card payments) – the business wants to know if the recipient has been charged, not necessarily if he has received the sms on his phone – these two things must be seperated out; a major undertaking for the networks.

- improve payout terms. The networks hold on to premium revenues for around 1 month before paying out. This has to be much improved on if more and more businesses are to be able to take advantage of building mcommerce into their business strategy.

- convince their shareholders that this is what they should be doing rather than making their phone networks better and improving on customer satisfaction, retention and experience.

- go head to head with the traditional banks and credit card companies who will soon be appearing on a mobile phone near you.

The mobile commerce model in the Philippines launched by a major telco, G-cash seemed to be a good model for m-commerce. Previous to this its major competitor Smart Telecom, launched a few years back its card based m-commerce service (Smart Money). I don’t think it really helped grow mobile commerce. There were many obstacles in usage.

This time, I believe Globe struck the gold mine with its G cash – mcommerce via sms. It recently won in the recent GSM Association Awards in Cannes.

One can use gCash for payments, international and domestic money remittance. One can also cash in their gcash load in various merchant partners nationwide. They had to pass through our central bank for approval.

Alternatives to SMS [ Mark Len ] [ 16-Mar-05 9:13am ] [ edit ]The operators have taken steps to address many of the concerns raised above. Trust, slice of the pie etc seem to have been addressed through the formation by 5 of the large operators of Simpay.

In essence the operators or shops can provide the content/goods and if they are connected to the Simpay scheme then the payment for the goods can be made using your phone with the settlement done by the credit card company (or the phone company if you wish). All parties get a small slice of the pie with the shop getting the most of the price of the goods.

It does address one of the major criticisms of the operators, namely trust. I agree with Paul that the revenue assurance in the

mobile companies is nowhere near the level of financial institutions and this scheme should address that area. I for one hope that when launched it is a success as I never really trust the premium SMS market. It will mean operators adopting the “sell more for less of a cut” rather than the current approach.

On another note, the possibility of paying for goods via SMS can already be done in the Czech Republic amongst other countries. There are quite a few soft drink vending machines that accept SMS payment in Prague. SMS a number on the machine and a Coke pops out!

As user not a provider, I think this would be great. If this was everywhere I would not need a wallet (where is your ID ?) I agree with Walter on the swipe idea. If I had a choice between swiping and having to type in an SMS message I know which I would prefer. I know it has been done and seems to be working in Japan, also the Oyster model seems to be working.

I have to agree with the comments about trusting the phone companies to handle separate financial transactions, but then I don’t think I would trust a bank to provide my mobile services. Perhaps some sort of agreement between them, maybe some sort of guarantee on the transactions from one of the ‘trusted’ (I use that word reservedly) banks.

Note that when considering the transaction cost (or the “cut” that operators take), one should keep in mind that small transactions are always much more expensive. While one may pay only a few % charge for card payments of £10 and up, cash handling is a completely differnt thing – there are costs with cashing, transporting, counting, bank charges etc – plus the cost of crime & fraud (and safety measures). Most proposed “electronic wallet” schemes have found that charges of up to 20% for transaction cost are well received for petty cash applications, especially where the whole sale is automatic such as in vending machines.

In Helsinki, Finland you can buy a tram ticket through SMS. The manual alternative, selling a £0.50 single paper ticket from a kiosk, must certainly have cost more than 50% of that ticket price!

it may not be as logical as that .. [ Ajit Jaokar ] [ 16-Mar-05 7:11pm ] [ edit ]i.e. in Korea .. I have seen SMS being used for payments. same with philipines and same with finland. Its like SMS itself .. probably not logical but still being used by people.

ofcourse there are still the operators but .. from a legislative hurdle .. is the e-money bill as applicable for mobile efectively dead?

See my new book at : www.opengardens.net

Mobile phone companies as banks? [ Louis Sequeira ] [ 17-Mar-05 1:10am ] [ edit ]In the light of this discussion I think, an old article on Macalla’s site from 2003 should make interesting reading

Here is some info on the Czech operator Oskar’s set up on Axalto’s site

Louis

——————————————————————————–

Footprints on the sands of time are not made by sitting down.

What with all the doom and gloom again.. [ Tomi Ahonen ] [ 17-Mar-05 2:32am ] [ edit ]Hi gang, sorry was away in Berlin speaking at a CRM conference, so dropping into this thread rather late.

But come on, you all at the Mobile Apps Club should know better. Of course we can have m-commerce, there are too many success stories all around the world to ignore. You can pay for almost anything by mobile phone already. Its no longer limited to “micropayment” such as the vending machines (first introduced in Finland back in 1998, about the same time when the very first mobile VAS – Value Add Service ie downloadable ringing tone was launched also of course in Finland), from buying train tickets in Austria to ski tickets in Norway to airplane tickets in Japan to buying movie tickets in the USA to paying your speeding tickets in Abu Dhabi, etc etc etc. When all the world was looking at the introduction of the i-Pod and i-Tunes, quietly the Korean market introduced direct MP3 music file downloads to 2.5G and 3G phones, and for example Ricky Martin sold 100,000 songs in just a week all the way back in 2003.

M-Commerce is not a trivial thing either, totally the opposite. Here in London in less than a year 20% of all congestion charges were already paid by mobile (don’t have latest numbers, know it is much higher by now). When Robbie Williams performed in Vienna Austria, 20% of his tickets were sold by mobile phone. In Helsinki Finland already 40% of all single tickets sold to public transporation are paid by mobile phone. In Croatia half of all parking tickets are paid by mobile phone. In Japan a massive 84% of all mobile phone users already subscribe for some paid news content on their mobile phone.

Yes, the global music industry? Already 13% of the global music industry revenues are paid for by mobile phone. Don’t pooh-pooh the humble ringing tone; already today our British pop stars earn more from the ringing tone versions of their Top-of-the-pops hits than they earn from the sales of Single CDs. And following right in the footprints of music is the second huge global shift, the videogaming industry, where 5% of the global gaming software revenues come from games downloaded to – and paid for by – the mobile phone.

The stats are overwhelming, overpowering, indisputable, irrefutable. Compare to ANY previous innovation in payment mechanisms, including paper money, cheques, wire transfers, credit cards, debit cards – never before has ANY industry seen such rapid cannibalisation as those top numbers I listed – public transportation 40% in two years, parking 50% in three years, and paid news content in five years. The internet, a dramatically disruptive technology, did not achieve these incredibly fast rates of cannibalisation in any industry that the Internet has changed.

Don’t kid yourselves, m-Commerce is going to happen globally, everywhere, of course. I do agree with many of the side comments here, such as that we need mobile operators to be less greedy, although clearly the market is perfectly happy to live with the 10% – 90% split as the extremely healthy and robust m-Commerce markets in Japan and Korea attest. (We don’t need to go to 1% – 99%). European operators tend to be offering deals ranging from keeping 40% to keeping 20%, depending on which operator (smaller give better deals) and which market (more mature markets have better deals).

I had over 100 m-Commerce ideas in my first book Services for UMTS and another about 150 more m-Commerce ideas in my second book m-Profits. Essentially all of those have been deployed in some variant by now. I track mobile services and apps and list my favourite each month at my website – and have discussed over 500 of them at public conferences over the past five years – so Justin if you need some specific types of examples, let me know and will be happy to give you more ha-ha…

PS Incidentially, m-Commerce succeeds well when it is one of the Early Eight classes of services (see my third book ha-ha, but I have talked about the E8 about a year ago or so here at the Mobile Apps Club) and especially when the transaction happens several times per week.

PSPS the current edition of Vodafone’s customer magazine, Receiver, has my article on killer apps for 3G. It is the evolution on the series of articles I’ve written on what for the most part is m-Commerce, such as in the Financial Times last year, Telecommunications two years ago and in 3G Mobile three years ago. The Receiver article can be read for free at this site

http://www.receiver.vodafone.com/12/articles/index04.html

Dominate !

Tomi Ahonen / HatRat

welcome back Tomi! [ Ajit Jaokar ] [ 17-Mar-05 6:18am ] [ edit ]

Its time to Dominate!

In the US, We Just Don’t “Get it” At All … [ Christian Mayaud ] [ 17-Mar-05 6:41am ] [ edit ]I always respond with bewiderment when europeans (and chinese, koreans, and indians for that matter) talk about these huge opportunities with “cellphone based e-commerce” … the only example we have in the states of anything close is the whole “downloadable ring-tone” market … which looks completely insane to me … $2 for a 10 sec ringtone???

I think the “downloadable ring-tone market” is purely a phenomena of “someone else is footing the tab” (we have a similiar phenomena in US healthcare economics) … in this case, teenagers have no disincentive to not download the new ringtone since it is their parents who pay the phone bill anyway and may not even notice it … if the teenagers themselves had to pay the two dollars for the new tone, I suspect the market would be quite a bit smaller than it is …

yes, we do use alot of SMS (both teenagers, families, and yes, a growing amount of “intracompany” communications as well) but to think of SMS as an e-commerce platform?

You europeans are just “way out there” on the bleeding edge — we see no sign what-so-ever in the US market that “cellphone based ecommerce” is even a remote possibility …

“Intelligence is like Four-Wheel Drive … It just gets you stuck in more remote places.” — Garrison Keilor

premium sms [ Steve Procter ] [ 17-Mar-05 6:42am ] [ edit ]

Tomi

You are talking about the wider remit of commerce being done via mobile phones in general, not specifically premium rate sms – which is where this debate started. Correct me if I am wrong but paying your London congestion charge by mobile does not use premium rate sms, it is simply a mechanism to trigger your already registered credit card into being debited. Now don’t get me wrong, this kind of use of a mobile to trigger payments is indeed fantastic. Maybe we need more of that. But ultimately this is a credit card payment not a mobile transaction.

And if we are looking at all sorts of ways of using a mobile for commerce then lets not forget that the latest versions of both wap and j2me are secure. So seeing wap sites or java apps take credit card details is going to happen more and more. Indeed Vodafone themselves use cards over wap to get your card during their 18+ verification checks. Well they did on mine anyway; I hope they do some intelligent checking of the phone type to ensure they aren’t presenting a card screen on wap phones that are still unsecure, or that would be another very interesting story for Justin…..

cheers

Steve

2-way sms for £99 per year

Steve Procter. Chief Executive. +44 (0)8712 777 111.

Oyster, Smart, and the US market [ Walter Adamson ] [ 17-Mar-05 8:02am ] [ edit ]The Oyster card is the Felica Networks/Sony consortium. In Japan they have just moved up a notch and gone through the pain of integrating the card into the phone, which is painstakingly complicated, and testing readers that are 100% reliable and super fast when there are 100 commuters jamming behind you at the station.

The Smart Communications applications in the Philippines are huge models of SMS m-commece success.

The integrated Felica card in Japan, as operated by DoCoMo, has no transaction fee. That is, in plain english, DoCoMo takes no transaction fee. I don’t know why not, but probably as an incentive to get the new handsets and the systems very widely adopted.

And in the US, Christian, the games market is huge and growing and this is much more than ringtones. And my predictions about business applications bursting forth this year driven by the US also will mean an explosion of mobile commerce applications, starting in B2C and then in B2B.

But Tomi’s point is right. What are we all discussing here? This is all a reality?!

Good points Walter, Steve. Steve on the topic itself, you make a valid point, but I did understand that Justin was looking for such examples in a more general sense, he didn’t seem to limit it to premium SMS

On premium SMS, I think the perfect model – Christian you shuold especially look into this – is Habbo Hotel (also discussed here at the Mobile Apps Club) – where youngsters pay for small payment value content on the fixed Internet, through premium SMS on their personal cellphones. In Finland in the 12-16 age bracket, Habbo Hotel is about the most addictive legal thing you can peddle to kids this side of Crack Cocaine ha ha..

While on the subject, Christian, the CTIA just announced USA finally hit the 60% penetration level. This is the critical point when the “total” economically viable population in Western countries has a cellphone, meaning that true change in society can start to happen, and the transition goes from technology enthusiasts pushing the technology, to average people and businesses inventing hundredfold more uses all by themselves. Yes, a big step for you Americans, but remember Finland hit that milestone back in 1998. You are literally 7 years behind. So all what is now happening in USA, you can read from history books as having happened in Finland in 1998, in Sweden Norway and Italy in 1999, in Israel, Hong Kong, Singapore in 2000, etc. Yes, Ringing tones were literally the start of it all. Yet mobile interenet CONTENT revenues world wide are a 15 Billion dollar industry – many times that of the fixed Internet. And where 70% of the fixed internet incomes are from “questionable” services like adult entertainment and gambling, the 70% of cellphone content revenues are from music (ringtones), games and news.

Re Ajit’s question on the EC ruling. In the UK this still needs to be interpreted by the FSA, which will publish a final guidance note on it, in the next few months hopefully. But Vodafone, for one, has already sent out letters to aggregaors giving the green light for services to launch. The rest are under pressure to follow

Habbo Hotel [ Steve Procter ] [ 18-Mar-05 7:23am ] [ edit ]Tomi

Please tell us how much a user in your Habbo Hotel example pays for an example service. Then please tell us how much of that money is received by Habbo Hotel and how much the operators keep?

Many web based businesses pay less than 2% bank charges. And with good house-keeping, security, etc chargebacks are not as high as many people like to think.

Yes, psms charges can be as good as 35% but worse case take this example…..on a 25p psms (which is actually 21p +vat) the payouts many aggregators give on some of the networks is down to around 7p…..which equates to a “bank charge” of 66%!!!

I don’t have the revenue-sharing numbers for Habbo in the public domain, so whatever I have, I can’t share.

But about the time when Habbo launched, the second largest Finnish mobile operator, Radionlinja (since renamed Elisa), was publically quoted that for a typical 1.50 Euro (=1 UKP) payment (including tax), the tax people keep 18%, the mobile operator keeps 27%, and the content owner gets 55%. If we remove the taxman, the revenue-sharing split was therefore 33% to the mobile operator, 67% to the content owner. I would guess that TeliaSonera (the biggest player) matches Elisa’s levels, and the smaller players (DNA, Saunalahti etc) will offer slightly better deals for content owners. Also I would expect that this level of revenue-sharing is still shifting, with gradually more going to the content owners.

Sorry, thats the best I have. What have you other Ecademists seen in your markets?